Risk Management and Change - Using Those Special Pair of Glasses to See the Big Picture

The more you review a risk plan and absorb it, the more risk you will mitigate. Now that you have reviewed your current plan, developed some type of spreadsheet or software for governance, and possess a reference to prior plans. Now that you have taken three months to take a good hard look at your business and now you will know what your additional risks are.

The second quarter is great time to either bring someone in or to have one of your staff research tax nexus issues.

So what is tax nexus?

Public Law 86 272, 15 U.S.C. 381 384, restricts a state from imposing a net income tax on income derived within its borders from interstate commerce if the only business activity of the company within the state consists of the solicitation of orders for sales of tangible personal property, which orders are to be sent outside the state for acceptance or rejection, and, if accepted, are filled by shipment or delivery from a point outside the state.

The term "net income tax" includes a franchise tax measured by net income. If any sales are made into a state which is precluded by P.L. 86 272 from taxing the income of the seller, such sales remain subject to throwback to the appropriate state which does have jurisdiction to impose its net income tax upon the income derived from those sales.

Tax nexus changes as tax laws in states change, 86-272 is not written in stone and therefore there are many states that have created laws that circumvent or are written to state that 86-272 is not applicable under certain circumstances. This creates tax and penalty risk. Legislatures have become creative with statutes and the failure to monitor this can be costly.

Some of these circumstances are:

You had a salesperson entering the state or in some instances cross state lines.

Third party performing warranty repairs in the state.

Third party installation or repair of a product.

As you can see your "nexus" is contingent on your current circumstances and business practices. Relevance to current business practices related to tax statutes must be reviewed at least yearly if not more often, this becomes forgotten in day to day operations and that is when penalties ensue. Laws change and states are constantly looking for creative ways to increase revenue. Take a look and mitigate compliance risks.

Let's take a close look at some of the other items to mitigate risk and continue the risk management and change process.

1.Perception. Take a good look at every employee that is part of your business and you probably have an idea of their strengths and weaknesses are don't you? Now, I am going to let you in on a little secret you don't. Want to know what I see when consulting. Try this!!

What happens is companies take a stereotypical view of employees. They Perceive! Most managers think employees that complain are problems, to be ignored or dealt with. Unfortunately, this is just the personality type you need to increase production, repair poor business practices or eliminate other risk related concerns in your business.

The complainers (something we avoid like the plague) are the real associates that can be the greatest factor of change in your business. Not all of them, but most of them. When consulting I hear complaints from employees all the time. They are not't heard, taken seriously, they are dismissed, but don't just dismiss them.

Take a different approach, try this, ask them why they are complaining, give them autonomy to open up and honestly tell you what is happening in their departments, listen take a subjective look.

Then, do some surveillance of your own. Take a look and see for yourself, we always perceive these associates as a nuisance; they are actually a force for change. I will bet that you will find these concerns, repair them and you will see their real worth and really do care. Stop the perception, start opening up, change the way you think before you competition gets the edge on you!

2. Dynamic, Your Dynamic is marked by continuous and productive activity or change. Now you need to take a look at the physical parts. Performance, Operations and Documentation. Yes, there are stories of those companies that did not build their infrastructure properly to handle an explosive growth then are struggling or have failed. Or took advantage of an opportunity and thus failed. I assure you there are far more stories of companies building cost structures for the future, for growth that never materializes. Surely there are companies that did not downsize because they consistently underestimated the potential size of the downturn. So now do you know how your business is growing? Honestly steady is better. Why? Because growth too fast means that the little things get overlooked hiring is to fast and lacks training and that's a reaction to growth not action toward growth. Are you able to currently handle the growth? Hampered by a poor credit market? These are items that can change your dynamic, your market power; please take a long hard look to keep it in balance.

This is also a great time to take a look at Internal Controls, Sarbanes-Oxley and take a look at opportunities for acquiring companies. Why, because if you feel after taking a look that all the other factors are in place now, you know in comfort you can perform all these at one time. Risk is also confidence; once you learn to accept change it becomes easier to mitigate change.

3. Stability, is a key look at your business vs. your competition, compared to how well you are performing and what are you performing well at. What new and differing metrics would you like to see, need to see? Measurement is key to stability; you can't see what you do not measure. Remember technology today is only good for six to nine months your product cycles are fading out faster and faster. Something new and better is bound to come along. Will it be from you or your competition? Are you ready if its you? Business performance management software may be the answer. Dashboards are another option and in some cases more so, management can retrieve real time data anywhere at any time right from the web instead of having to ask for the information. These are items help you monitor your stability, your market standing so you can maintain balance.

Above all remember time is of the essence, not being prepared for these situations costs hard payroll dollars. Heightened costs and reduces productivity. It may even put you on the road to Chapter 11; look at all the airlines in the past month.

Look also to eliminate some items to take on new ones, eliminate that one report, or find a new way to generate them, tailor a process to lessen time, or don't send that email, but make a change build a relationship ask questions in person this time, for the associate and yourself. All these items cost your organization productivity. How? It takes focus off the way that productivity and creativity can be improved, puts it on an unneeded task, that this time could be better used to prepare for future growth. Hope these ideas have sparked a new vigor in you one for change!

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